HFCs Q3 Results Preview - To Be Softer Than Q2 Due To NIM Contraction: Prabhudas Lilladher

Prabhudas Lilladher Report

For our coverage housing finance companies, assets under management at Rs 3.3 trillion could see 1.9% QoQ growth compared to 0.9% in Q1 FY24 and plus 7.5-9.0% (likely) in case of housing segment for banks.

Net interest margin could decline by 20 basis point QoQ to 3.17% as LIC Housing Finance Ltd. could see some moderation in margins. Hence net interest income may fall by 3.7% QoQ. As policy rates have stabilised, NIM for HFCs could improve in FY24E since asset repricing would be faster as compared to liabilities.

Disbursal run-rate of LIC Housing Finance is the key monitorable especially given weak credit flows in the last few quarters.

Other income might decline by 6% QoQ to Rs 1.16 billion while opex could rise by 7.3% QoQ to Rs 4.75 billion. Hence pre-provision operating profit could dip by 5.9% QoQ to Rs 21.9 billion.

We see a 6 bps QoQ decline in provisions to 56 bps as Can Fin Homes Ltd. would see credit costs normalise. Profit after tax may fall by 5.0% QoQ to Rs 13.9 billion. Can Fin Homes remains our preferred pick in HFCs.

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